Shooting Down the Satellites

Volkswagen is the latest to strike a blow against still-struggling satellite radio, announcing today it is partnering with Germany broadcaster Hit-Radio Antenne Niedersachsen to develop “the radio of the future.”

Details are scant, but VW says what will result is a new “Hybrid Radio” that will allow listeners to tailor content to their needs.

“The Hybrid Radio is bound to be a success, as it fulfills the listener demands of tomorrow by combining the classic car radio with the Internet,” Martin Weiser, head of driver information systems at VW, says in a release.

Hybrid Radio will allow the user to create a personalized playlist ranging from local news to specific music genres that can be accessed with the push of a single button.

The first field tests will get under way next year in the Lower Saxony area of Germany. VW doesn’t say when it expects to make Hybrid Radio available commercially.

There’s also no word from the auto maker whether it plans to experiment with something similar in the U.S., where Sirius XM Satellite Radio installation rates are on the rise, but subscriber retention rates are less encouraging.

Satellite radio already is under attack from free, high-quality HD Radio broadcasting, and in-car Internet-radio capability – bolstered by services such as Pandora.com that allow listeners to “build” their own music stations – appear on the verge of muscling their way into more car and truck IPs. Ford’s Sync system already allows smart-phone users to listen to Pandora through the car’s audio system, for example.

The auto industry has been a big reason for what success satellite radio has had thus far. Ward’s data indicate nearly half of the ʼ09 cars and trucks sold in the U.S., or about 5 million vehicles, were equipped with Sirius XM radio, as many auto makers continue to provide free trial subscriptions for the service as a perk to seal the deal with buyers.

VW, itself, installed satellite radios in all of the light trucks and about half the cars it sold in the U.S. last year.

But according to the website Wikinvest, the number of Sirius XM subscribers has been trending downward, from 19 million at the start of 2007 to about 17 million at the end of 2009. While Sirius XM picked up 8 million new subscribers last year, it failed to hang on to more than 4 million who had been getting the service, Wikinvest says.

Sirius XM’s advantage is its plethora of channels, exclusive programming and big-name personalities.

But competitors are looking to shoot down its satellites. And auto makers – eager to give customers what they want – could be the deciding factor in whether the service lives long and prospers or disappears in a flash.